Editing Purchasing power parity (section)

{{Short description|Measure of prices in different countries}}
'''Purchasing power parity''' ('''PPP''')<ref name="Krugman2" /> is a measure of the price of specific goods in different countries and is used to compare the absolute [[purchasing power]] of the countries' [[currency|currencies]]. PPP is effectively the ratio of the price of a [[market basket]] at one location divided by the price 
of the basket of goods at a different location. The PPP inflation and exchange rate may differ from the [[Exchange rate|market exchange rate]] because of [[tariff]]s, and other [[transaction cost]]s.<ref name="oecd_purchasingpowerparities">{{cite web |last1=OECD |title=Purchasing Power Parities - Frequently Asked Questions (FAQs) |url=https://www.oecd.org/sdd/prices-ppp/purchasingpowerparities-frequentlyaskedquestionsfaqs.htm |website=OECD }}</ref>

The purchasing power parity indicator can be used to compare economies regarding their [[gross domestic product]] (GDP), labour productivity and actual individual consumption, and in some cases to analyse price convergence and to compare the [[cost of living]] between places.<ref name="oecd_purchasingpowerparities" /> The calculation of the PPP, according to the [[OECD]], is made through a ''basket of goods'' that contains a "final product list [that] covers around 3,000 consumer goods and services, 30 occupations in government, 200 types of equipment goods and about 15 construction projects".<ref name="oecd_purchasingpowerparities" />